Net interest income, on a fully tax-equivalent basis, decreased by $274,000, or 14.3%, to $1.6 million for the three months ended June 30, 2024, from $1.9 million for the three months ended June 30, 2023. The net interest margin decreased by 38 basis points to 1.93% for the three months ended June 30, 2024, from 2.31% for the three months ended June 30, 2023. The decline was primarily due to a 161 basis point increase in the average rate for certificates of deposit and an $18.3 million increase in the average balance of certificates of deposit, offset by a 41 basis point increase in the average yield on interest-earning assets and a $9.0 million increase in the average balance of interest-earning assets. The increase in certificates of deposits and a corresponding decrease of $17.0 million in the average balance of other interest-bearing deposits reflected customers desire to seek higher interest-earning accounts. The interest earned on loans increased $44,000, to $1.8 million for the three months ended June 30, 2024, from $1.7 million for the three months ended June 30, 2023. The interest earned on securities increased $137,000, to $1.1 million for the three months ended June 30, 2024, from $968,000 for the three months ended June 30, 2023. The interest earned on cash and short-term investments increased $244,000, to $282,000 for the three months ended June 30, 2024 from $38,000 for the three months ended June 30, 2023. The interest earned on interest-earning assets was due to higher average cash balances as well as higher yields due to the higher interest rate environment, offset by $6.3 million decrease in the average balance of loans and a $1.6 million decrease in the average balance of securities.

The Company recorded reversals of the provision for credit losses of $32,000 and $20,000 for the three months ended June 30, 2024 and March 31, 2024, respectively. The Company did not record a provision for loan losses during the three months ended June 30, 2023. The reversals of the provision for credit losses and the absence of a provision were due to changes in economic conditions, lower loan balances and continued strong asset quality. The allowance for credit losses as a percentage of total loans was 0.90%, 0.90%, and 0.98% at June 30, 2024, March 31, 2024 and June 30, 2023, respectively.

Non-interest income decreased $1,000, or 0.6%, to $166,000 for the three months ended June 30, 2024, from $167,000 for the three months ended March 31, 2024, primarily due to a decrease of $4,000 in customer service fees and a decrease of $1,000 in income on bank-owned life insurance, offset by an increase of $4,000 in other income.

Non-interest income increased $2,000, or 1.2%, to $166,000 for the three months ended June 30, 2024, from $164,000 for the three months ended June 30, 2023, primarily due to an increase in other income of $2,000, or 3.3%.

Non-interest expense decreased $143,000, or 7.5%, to $1.8 million for the three months ended June 30, 2024, from $1.9 million for the three months ended March 31, 2024. The decrease was due to a decrease in salaries and employee benefits of $87,000, or 7.8%, primarily due to the reduced cost of the pension plan, a decrease in occupancy and equipment expense of $31,000, or 12.1%, due to a reduction in service contracts expense and the lack of snow removal costs, a decrease of $15,000, or 15.5%, in data processing fees and a decrease of $13,000, or 3.5% in other general and administrative costs.

Non-interest expense decreased $168,000, or 8.7%, to $1.8 million for the three months ended June 30, 2024, from $1.9 million for the three months ended June 30, 2023. The decrease was due to a decrease in salaries and employee benefits of $116,000, or 10.1%, primarily due to the reduced cost of the pension plan and a decrease in headcount, a decrease in occupancy and equipment expense of $49,000, or 17.9%, due to a reduction in service contracts expense offset by an increase in utilities expense and a decrease of $9,000, or 20.9%, in deposit insurance.

The Company recorded an income tax benefit of $106,000 for the three months ended June 30, 2024, compared to an income tax benefit of $42,000 for the three months ended March 31, 2024 and income tax expense of $19,000 for the three months ended June 30, 2023. The decrease in income tax expense for the three months ended June 30, 2024, compared to the three months ended March 31, 2024 was due to an income tax benefit related to the recognition of a post-retirement benefit and adjustments to the net deferred tax asset. The decrease in income tax expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, was due to a decrease in income before income taxes, an income tax benefit related to the recognition of a post-retirement benefit and adjustments to the net deferred tax asset.

Full Year Operating Results
Net interest income decreased, on a fully tax-equivalent basis, by $2.1 million, or 23.3%, to $6.8 million for the twelve months ended June 30, 2024 from $8.9 million for the twelve months ended June 30, 2023, due to a $3.0 million increase in interest expense due to an increase in the interest on certificates of deposit of $2.7 million and the increase in interest on FHLB advances of $399,000. The Company recognized a 127 basis point increase in the cost of interest-bearing liabilities, due to higher interest rates and a greater percentage of interest-bearing liabilities in higher-costing certificates of deposit and increased borrowings. The increase in interest expense was offset by an increase in interest income of $979,000 due to higher average yields. Interest income on loans increased $325,000 due to a 25 basis point increase in the average yield on loans, offset by a decrease in the average balance of loans of $3.0 million, or 1.7%. Income on securities increased $443,000 due to a 31 basis point increase in the average yield on securities, offset by a decrease in the average balance of securities of $1.1 million, or 0.8%. The interest earned on cash and short-term investments increased $211,000 from the prior year, due to a 197 basis point increase in the average yield, offset by a decrease of $74,000 in the average balance of cash and short-term investments. The net interest margin decreased 58 basis points for the twelve months ended June 30, 2024, to 2.03%, from 2.61% in the prior year.

The Company recognized a reversal of the provision for credit losses of $322,000 for the twelve months ended June 30, 2024, compared to no provision for loan losses in the prior year period. The reversal of the provision for credit losses for the twelve months ended June 30, 2024 was recorded due to improved economic conditions, lower loan balances and continued strong asset quality.

Non-interest income increased $1,000, or 0.2%, to $665,000 for the twelve months ended June 30, 2024, from $664,000 for the twelve months ended June 30, 2023. The decrease was primarily due to increases in customer service fees of $9,000 and income on bank-owned life insurance of $9,000, offset by a decrease of $17,000 in safe deposit box fees as we now recognize fees over the rental period.

Non-interest expense increased $29,000, or 0.4%, to $7.7 million for the twelve months ended June 30, 2024, compared to $7.7 million for the twelve months ended June 30, 2023. Salaries and benefits increased $41,000, or 0.9%, to $4.6 million, due to annual increases to salaries and health insurance of employees and employee stock-based compensation expense. Deposit insurance increased $27,000, data processing costs increased $25,000 and other general and administrative expenses increased $34,000, offset by a decrease of $53,000 in occupancy and equipment expense and a decrease of $45,000 in advertising costs.

Income tax expense decreased $340,000 to an income tax benefit of $39,000 for the twelve months ended June 30, 2024, compared to an income tax expense of $301,000 for the twelve months ended June 30, 2023, due to the decrease in income before income taxes, partially offset by an increase in the deferred tax valuation allowance.

Balance Sheet
Assets: At June 30, 2024, total assets amounted to $363.4 million, compared to $349.0 million at June 30, 2023, an increase of $14.4 million, or 4.1%, primarily due to a $20.1 million increase in cash and cash equivalents, a $323,000 increase in FHLB of Boston stock, a $268,000 increase in bank-owned life insurance, a $166,000 increase in deferred tax asset and a $216,000 increase in other assets, offset by a $5.5 million decrease in net loans, a $941,000 decrease in securities, a $167,000 decrease in premises and equipment and a $93,000 decrease in operating lease right of use asset. The increase in cash and cash equivalents was due to increases in deposits and FHLBB advances. The decrease in loans was a result of borrower principal payments exceeding new originations, due to the higher interest rate environment.

Asset Quality: At June 30, 2024, there were four current loans rated substandard with a provision for credit loss of $10,000. There were no loans rated special mention, doubtful or loss and no non-performing or delinquent loans at June 30, 2024. There were no charge-offs of loans for the three or twelve months ended June 30, 2024 or 2023.

Liabilities: Deposits increased by $7.5 million, or 2.8%, during the twelve months ended June 30, 2024, due to an increase of $21.6 million in higher-yielding term certificates, offset by a decrease of $10.0 million in regular accounts and $5.0 million in money market accounts. FHLBB advances were $10.4 million at June 30, 2024 compared to $3.7 million at June 30, 2023, as we implemented a leverage strategy to increase liquidity and interest income.

Stockholders' Equity: Total stockholders' equity increased $161,000, to $76.1 million at June 30, 2024, from $75.9 million at June 30, 2023. The increase was primarily due to the changes in unearned ESOP compensation of $102,000, and stock-based compensation of $358,000 and  net income of $33,000, offset by the effect of the adoption of ASU 2016-13, net of taxes, of $223,000, and the repurchase of company stock of $78,000 for the twelve months ended June 30, 2024.

On July 1, 2023, the Company adopted ASU 2016-13, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans receivable and securities held to maturity. In addition, ASC 326 made changes to the accounting for securities available for sale. It also applies to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. The following table illustrates the impact of ASC 326:

 

About CFSB Bancorp, Inc.
CFSB Bancorp, Inc. is the federal mid-tier holding company of Colonial Federal Savings Bank and is the majority-owned subsidiary of 15 Beach, MHC. Colonial Federal Savings Bank is a federally chartered stock savings bank that has served the banking needs of its customers on the south shore of Massachusetts since 1889. It operates from three full-service offices and one limited-service office in Quincy, Holbrook and Weymouth, Massachusetts.

Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "indicate," "would," "contemplate," "continue," "target" and words of similar meaning. These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, demand for loan products, deposit flows, changes in the interest rate environment, the effects of inflation, general economic conditions or conditions within the securities markets, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the FRB, changes in the quality, size and composition of our loan and securities portfolios, changes in liquidity, including the size and composition of our deposit portfolio, and the percentage of uninsured deposits in the portfolio; changes in asset quality, prepayment speeds, charge-offs and/or credit loss provisions, our ability to access cost-effective funding; changes in demand for our products and services, legislative, accounting, tax and regulatory changes, the current or anticipated impact of military conflict, terrorism or other geopolitical events, a failure in or breach of our operational or security systems or infrastructure, including cyberattacks that could adversely affect the Company's financial condition and results of operations and the business in which the Company and the Bank are engaged, the failure to maintain current technologies and the failure to retain or attract employees.

You should not place undue reliance on forward-looking statements. CFSB Bancorp, Inc. undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

 

 

 

 

 

 

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SOURCE CFSB Bancorp, Inc.